4 march 2011, strong vigilance

There you go then, interest rates are on the up again. It's been eminently predictable (28 jan)for a while now, and so as the ecb traffic light turns to green, no-one should be surprised that the central banks will hold back the tide no longer. I remember well getting to work on 9 august 2007, to find that we had injected some 94 billion euros into the system to keep the money markets operational, and how from seeming fantastical and revolutionary it became within hours what the world did for the next few years. Again now frankfurt leads the way, but it's echoes across europe will quickly follow. The governor of the danish central bank once said that outside the euro he has full independence to set interest rates - for about 15 minutes after the ecb announce. The others are not far behind. This is a huge problem in london, where although the hawks have been gathering on the monetary policy committee for a while now (with 3 from 9 members voting for a rise in february), the establishment has been strongly bending the knee to the treasury's need to keep the monetary stimulus flowing, but the timer is now ticking and if they can hold out to june without too much damage being done, I would be surprised. Already the pound is on the way down again. It won't be a dash upwards though. By starting what some will deem a tad early, the rise back to "normality" can be well-paced and I wouldn't expect more than perhaps one other quarter point rise before trichet hangs up his traffic lights in October.